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Thursday, May 2, 2013

Roughly 40 percent of renters would have qualified for a mortgage in 2012

Many factors have increased the number of renter households
qualified to purchase a home in 2012 versus 2000 and 2005: 1) incomes
have increased, 2) population has grown, 3) mortgage rates are lower,
and 4) prices have fallen since 2005.

Additionally, while home prices rose from 2011 to 2012, lower
mortgage rates have more than offset the gains, so the income needed to
purchase the median priced home has actually gone down from 2011 to 2012
in spite of rising home prices.

The tables below show the data underlying the change in required
income. Qualifying income required to purchase a median priced home has
fallen from $50,400 in 2005 and $40,300 in 2000 to $33,100 in 2011 and
$31,700 in 2012 [1].

Finally, based on all of these factors, we see that while 33 percent
of renters qualified to buy the median priced home in 2000 and 24
percent of renters qualified to buy the median priced home in 2005, 47
percent of renters would qualify in 2011 and 40 percent would qualify in
2012 [2]. Translating these numbers into households, roughly 8 million
renters qualified to purchase the median priced home in 2005 while in
2012, 20 million renter households qualify.

These calculations assume that potential buyers meet credit
qualifications and have sufficient cash on hand to close a transaction.
Lending standards, credit quality, and access to funds will affect the
number of households who will ultimately be able to buy a home.

[1] All values are nominal, not real values.[2] This calculation assumes that income distribution in 2012 is the same as it was in 2011.